All posts tagged Stephen Lewis

Smart bears presented a problem for equity investors back in the market nadir of May 2009. They still do.

Even as stocks staggered back up, seasoned market-watchers of impeccable reputation growled that it was all smoke and mirrors. Asset-price rises were an illusion conjured up by central bankers and complicit politicians, they said. Huge stimulus and liquidity provision were mitigating recession and masking structural faults, rather than curing either. It would all end in tears.

Suspecting as much themselves some investors listened. And they stayed away from the indexes, too. But the markets rose and rose anyway. The sell side sung its usual siren song, seducing many. To be fair to equity salesmen, the economics did seem to be improving too. The world didn’t end. Banks started talking to each other again. Global trade wheezed back to life. Even so, some still held back. A lot of very clever people were telling them this couldn’t go on. Underlying demand simply wasn’t there.

But eventually came capitulation. No one fights a rising market forever, even if they don’t believe it can last. So here we are. Well above the terrible depths and prepared for ongoing if bumpy economic expansion.

But the smart bears are still at it.

Stephen Lewis, chief economist at Monument Securities and many London investors’ choice as Cleverest Man in England, believes the U.S. to be in a depression, one which will resist all attempts by the authorities to bring it back to trend growth. We shouldn’t be fooled by the lack of soup kitchens and other Steinbeckian oozings from the Grapes of Wrath, we’re still in big, structural trouble.

Albert Edwards, Societe Generale’s very smart strategist, whose presentations can fill large rooms, has just averred again that unprecedented monetary and fiscal stimulus has produced an unprecedented weak recovery. As even that fades, “investors will soon have a once in a lifetime opportunity to invest in equities at bargain basement valuations,” he says.